How Should Investors React To Cree, Inc.'s (NASDAQ:CREE) CEO Pay?
Gregg Lowe has been the CEO of Cree, Inc. (NASDAQ:CREE) since 2017. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Next, we'll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.
See our latest analysis for Cree
How Does Gregg Lowe's Compensation Compare With Similar Sized Companies?
According to our data, Cree, Inc. has a market capitalization of US$3.6b, and paid its CEO total annual compensation worth US$10m over the year to June 2019. We think total compensation is more important but we note that the CEO salary is lower, at US$845k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations from US$2.0b to US$6.4b, and the median CEO total compensation was US$5.7m.
Next, let's break down remuneration compositions to understand how the industry and company compare with each other. On a sector level, around 16% of total compensation represents salary and 84% is other remuneration. Non-salary compensation represents a greater slice of the remuneration pie for Cree, in sharp contrast to the overall sector.
It would therefore appear that Cree, Inc. pays Gregg Lowe more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business. You can see a visual representation of the CEO compensation at Cree, below.
Is Cree, Inc. Growing?
Cree, Inc. has reduced its earnings per share by an average of 11% a year, over the last three years (measured with a line of best fit). It saw its revenue drop 3.4% over the last year.
Sadly for shareholders, earnings per share are actually down, over three years. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.
Has Cree, Inc. Been A Good Investment?
I think that the total shareholder return of 36%, over three years, would leave most Cree, Inc. shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
In Summary...
We examined the amount Cree, Inc. pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.
Neither earnings per share nor revenue have been growing sufficiently to impress us, over the last three years. However, we can't argue with the strong returns to shareholders, over the same time period. Considering this, shareholders are probably not too worried about the CEO compensation. Moving away from CEO compensation for the moment, we've identified 3 warning signs for Cree that you should be aware of before investing.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
